Ivy Software Mba Prepworks Fundamentals Of Economics Study Guide Questions And Correct Answers

demand deposits {Ans: a depositor with such an account can write a check to demand those deposits at any time}THe idea that the money supply affects only nominal variables and not real variables is formally known as the classical dichotomy. (True or False) {Ans: False. In the long run, the money supply affects only nominal variables and not real variables. This means that when there is a change in the money supply by the Federal Reserve Bank, then the only effect is a change in the price level (ie: causing inflation or deflation). In the long run, a change in the money supply has absolutely no effect on the real value people place on goods and services. This second idea is formally called monetary neutrality}market supply curve {Ans: the horizontal summation of individual supply curves yields the market supply curve}Three basic functions of money {Ans: 1) a medium of exchange 2) a store of value 3) a unit-of-account}Imports {Ans: include all final goods and services produced by foreigners outside the U.S. and purchased by a member of the domestic population.}automatic stabilizers {Ans: automatically stimulate the economy when it enters a deflationary gap and automatically